Peloton Interactive Inc.’s (PTON) stock has experienced impressive growth over the past six months, after a brief dip in February 2020. Peloton has outperformed the S&P 500 easily, rising approximately 216% while the S&P 500 rose by about 2.75% as of September 18. The strong performance has landed Peloton on the WhaleWisdom Heat Map with a ranking of twenty and garnered the attention of hedge fund managers.
The exercise equipment and media company has faired very well during the coronavirus pandemic, despite the temporary forced closure of its retail stores and studio classes during the quarantine. While quarantine has been an inconvenience, it has led to many Americans telecommuting and seeking alternative exercise options outside of fitness centers.
Peloton is seeing favorable activity from hedge funds and institutions. Looking at second-quarter activity by the top hedge funds, the aggregate 13F shares held increased to approximately 52.1 million from 45.5 million, a jump of about 14.7%. Of the hedge funds, 39 created new positions, while 28 added to an existing one, as 11 exited, and 27 reduced their holdings. Institutions were also buying, and overall, institutions increased their aggregate holdings by about 43.5%, to approximately 168.7 million from 117.5 million.
Analysts project Peloton’s revenue will grow by approximately 97.2% in the fiscal year 2021, to $3.6 billion in revenue. Year over year revenue growth is forecast to continue at an annual pace of around 30% for 2022 and 2023. There is more good news for the shares, with an expectation that earnings will then rise to $0.30 by June 2021 and ultimately to $1.59 by June 2023.
Analysts Share Favorable Forecasts
Stifel Financial Corp.’s analyst, Scott Devitt, has a favorable outlook for Peloton, seeing it as the “Apple” of fitness, giving it a buy rating and a price target of $120. Most of Peloton’s revenue is generated from connected fitness products and product subscriptions. Needham & Co.’s analyst, Dan Medina, also gave the company a buy rating, recognizing the appeal of Peloton’s integration of hardware, software, and content. Oppenheimer & Co., Inc. increased its price target to $105, up from $50, maintaining an outperform rating. Goldman Sachs Group, Inc. expects strong performance and gives Peloton an impressive price target of $138, while Bank of America Corp. issued a price target of $116.
Peloton is positioned to continue to benefit from the pandemic’s influence on consumer fitness choices. The rising popularity of at-home workouts in place of traditional gyms has increased demand for Peloton’s fitness products and subscriptions, a trend that could continue beyond the pandemic. Analysts’ estimates for Peloton’s continued growth are appealing for investors of this stock and is likely why hedge funds and institutions have been moving into the shares.